1 / 31

CUHK EMBA talk

CUHK EMBA talk. December 4th 2006 Hong Kong. The venture business – Venturing into the unknown. Creating new businesses often with new technologies Economic growth engines Fast moving - a dynamic and often chaotic environment High risk of failure. The venture capitalist.

kaleigh-logan
Télécharger la présentation

CUHK EMBA talk

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CUHK EMBA talk December 4th 2006 Hong Kong

  2. The venture business – Venturing into the unknown • Creating new businesses often with new technologies • Economic growth engines • Fast moving - a dynamic and often chaotic environment • High risk of failure

  3. The venture capitalist • Not the company founder - the entrepreneur • A professional interposed between the provider and consumer of venture capital • Angel investor (friends and family) versus institutional venture investor • Makes financial investments in start-up or young companies and helps them grow • The portfolio approach

  4. The venture investing process • Deal generation • Analysis • Deal mechanics • Growing the investee company • Exit / liquidity

  5. Deal generation • The bottom-up approach • The top-down approach

  6. Deal generation - networking • VCs run in packs • Who are your friends – - birds of the same feather? - Mainstream vs the fringe • How big is your rolodex? • What is the quality of your network? • Why should someone be your friend?

  7. Deal generationHigh probability networks • Other VCs – why would you be invited into the deal? • Serial entrepreneurs • Academics • Industry focus

  8. Deal generation – big trends • Top down, macro trend • Big trends change with time • A keen observer of the world • In tune with global leaders in different industries • In tune with local conditions and idiosyncracies • The VC as a generalist and a quick study

  9. Deal generation –Attributes of a VC • An optimist • A risk taker • Curious • Activist agent of change • Legwork • Sleuth work • Parallel processing • Personable • Perceived to be valuable

  10. Deal generation – the intermediary • Buy side vs the sell side • Inherent conflict of interests • Market inefficiencies

  11. Deal generation – having a history helps • Your track record - a history that cannot be erased • High profile successes • Reputation • Brand building • The haves will have more

  12. Analysis – what is a good deal • Multivariate • Fuzzy • No perfect information • A judgment call • Honing your instincts

  13. Analysis – a reductionist approach • Reducing the analysis to discrete variables enforces discipline • Examples in two dimensional space

  14. Example 1 high barrier to entry for competitors high low operational intensity low

  15. high Dependence on creativity high low cash to breakeven low Example 2

  16. high life-time revenue per customer high low cost of customer acquisition low Example 3

  17. Analysis – contextual epistemology • Analysis is not abstract, it is contextual • A n-dimensional space into which one maps any given opportunity • The case study method

  18. Analysis – the value proposition • Technology based - More likely to be universal - IP as defense and repository of value • Business model based - More likely to be locally relevant - First mover advantage and customer based as defense and repository of value

  19. Analysis - risks • Not only quantitative, cannot be reduced to a single variable such as volatility • Qualitatively different kinds of risks - Financial risks - Technology risks - Market risks - Execution risks - People risks - Regulatory risks - Political risks - Etc etc

  20. Analysis – the Business Plan • Committing to writing helps to distill essential considerations and crystalize defensible conclusions • Be quantitative even if it involves assumptions • Keep it simple, ask important questions

  21. Deal Mechanics –the structure of a deal • Pre-money valuation - No rules, but there are ballparks - Subject to market sentiment - Beauty is in the eyes of the beholder - Up, flat or down rounds - Cramp-down rounds • Investment amount - Tranches - Milestones

  22. Deal Mechanics • Financial instruments - preferred - common - warrants - debt - bridge loan • Other terms - option pool • liquidation preference • ratchet • Claw back

  23. Growing the company • Executing the business plan - Discipline - Proof of concept and adjusting along the way as new information is available - Multiple incarnations of a company - When to persist and when to change • Hiring and team building • Control of the burn rate • The functioning of the board • Outside board members • Entrepreneur-in-residence • Fighting one fire after another

  24. Growing the Company – funding the growth • Burn rate • Raise money when you have a runway • What other values come with the money

  25. Attributes of a VC • Good - Strong capital base - Informed and realistic expectations - Support and guidance to the company / entrepreneur - Peripheral vision, connecting the dots - Connections - Brand equity

  26. Attributes of a VC • Bad - Out-of-control ego - Too authoritarian - Too indulging - Fair weather friends - A zero-sum-game view of the world

  27. Exit • Good companies will always have exit alternatives for their shareholders • Public market for growth companies - Nasdeq, GEM, AIM etc - Valuation and depth of the market - The IPO window • When to sell the listed shares - Philosophy of not being a stock market player - Timing of stock disposition according to the company’s prospect - SEC rules • Trade sales

  28. Hong Kong • The economy - Small population - Mature economy with oligarchic characters - Factors important in HK’s past development have only weak linkages to conditions conducive to a technology based economy - Former advantages marginalized by China’s development

  29. Hong Kong • Owners of financial capital - Family run fortunes - Impatience of a trading mentality exacerbated by the refugee mentality - Comfortable with real property vs intellectual property • Fuzzy boundary • Unbounded supply

  30. Hong Kong • Science and technology - No technology-based economy - The scientific research base being too small - Mediocre research • Excessive pragmatism leads to short-term research agendas • Lack of long-term government policy

  31. Kong Hong • The society • Inward looking • Complacent - A shallow and hedonistic culture - Young people grow up in a green house lacking the drive to do great things

More Related